UPDATE 8-Oil rises as Turkey-Syria tensions fuel supply concerns


* Turkey, Syria fighting reinforces worry over Middle Eastsupply

* North Sea crude output set to fall in November

* Coming Up: CFTC positions data 3:30 EDT Friday

(Recasts, updates prices, market activity)

By Robert Gibbons

NEW YORK, Oct 11 (Reuters) - Oil prices rose on Thursday astensions between Syria and Turkey escalate, reinforcing concernsabout risks to the region's supply, and maintenance curbs onNorth Sea output continue.

Moscow accused Turkey of endangering Russian lives afterNATO-member Turkey on Wednesday forced a Syrian passenger planeto land and seized what it suspected was military equipmentbeing ferried from Russia to Syria and the embattled governmentof President Bashar al-Assad.

Damascus said intercepting the Syrian Air plane was an actof piracy and the incident follows the previous warning byTurkey's chief of staff that Ankara would use greater force ifshells from Syria continued to hit Turkish territory.

"The Syrian situation is heating up and there are fearsabout Turkey, a NATO member, retaliating and contagion in theregion," said Bjarne Schieldrop, analyst at SEB in Oslo.

Oil prices are being buffeted by pressure from concernsabout lower global fuel demand amid slowing economic growth,while the risk of supply disruptions in the Middle East andloading delays for crude from the North Sea provide support.

Brent November crude

rose $1.01 to $115.34 a barrelby 1:41 p.m. EDT (1741 GMT), having reached $116, highest sinceprices reached $117.02 on Sept. 17. Brent's November contractexpires on Oct. 16.

U.S. November crude

was up 87 cents at $92.12 abarrel, having swung from $91.09 to $92.94. It reached $93.66the previous session.

Brent's premium to U.S. crude increased and stayed above $23a barrel, having reached $23.54 during Thursday's session. Thatwas the highest in nearly a year, when Brent was priced $23.66above U.S. crude intraday on Oct. 21, 2011.

North Sea crude oil output from 12 production streams is setto fall by about 1 percent in November, according to Reuters'calculations, another factor supporting Brent prices.

Firmer refining margins and steep backwardation in thegasoil market, where prices are higher for prompt delivery thanfor later dates, pointed to firm demand going into the northernhemisphere winter.

"At current prices, the upcoming winter will be the mostexpensive winter ever for the consumers using heating oil," saidOlivier Jakob at Petromatrix in Switzerland, adding thatgasoline prices were also high.


Tempered gains for crude futures could be expected afterU.S. government inventory data released on Thursday showed crudeoil stocks rose more than forecasted, but a steep drop indistillate stocks and a less dramatic slip in gasoline stockskept concerns about tight supplies of refined products in focus.

U.S. crude stocks rose 1.67 million barrels last week, theEnergy Information Administration said in a report on Thursday,more than the 800,000-barrel build expected.

Distillate stockpiles dropped 3.18 million barrels, muchmore than the half million barrels consensus forecast, whilegasoline stocks fell 534,000 barrels.

U.S. heating oil

futures churned higher, up more than1 percent, while RBOB gasoline

edged lower.

"That big distillate draw may be producing an expectationthat crude demand will go up as heating season approaches," saidMike Fitzpatrick, editor-in-chief at industry newsletterEnergyOverview in New York.

More supportive data showing U.S. initial jobless claims attheir lowest in more than four years last week helped push U.S.equities on Wall Street higher.

The euro rose against the dollar for the first time in fourdays after the head of the International Monetary Fund saidindebted euro zone economies should have more time to cut budgetdeficits, overshadowing a downgrade of Spain's credit rating.

A weaker dollar indexcan be supportive todollar-denominated commodities like crude oil.


Graphic on 24-hr Brent chart analysis

Graphic on WTI-Brent spread


(Additional reporting by Simon Falush and Alice Baghdjian inLondon and Florence Tan in Singapore; Editing by Bob Burgdorfer)

((robert.gibbons@thomsonreuters.com)(+1 646 223 6059)(ReutersMessaging: robert.gibbons.reuters.com@reuters.net))

Keywords: MARKETS OIL/